Pharma Gujarat PDF

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Mumbai Pradeep Udhas
KPMG House, Kamala Mills Compound Head, Markets Committee Contact
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Sunil R Parekh
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Hitesh Gajaria Ahmedabad: 380 015.
Tel: +79 2686 8100 (20 lines)
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Gujarat:04WhitepaperA4v2.qxt 05-01-08 7:35 PM Page 1
Foreword
Theglobalpharmaceuticalindustryisdemonstratingmarkedtrendsinrecent
times,withthefocusshiftingfromtraditionalmarketslikeU.S.topromisingnew
onesparticularlyLatinAmericaandAsiaPacific.Indiatoo,hascarvedouta
significantportionoftheworldpharmapie,registeringgrowthacrosssegments
includinggenerics,researchanddevelopmentofNewChemicalEntities(NCE)
andContractResearchandManufacturingServices(CRAMS).
AttheforefrontofthegrowthinthepharmaceuticalindustryinIndiaisGujarat.
Accountingfornearly42percentshareofIndia’spharmaceuticalturnover,22
percentofitsdrugexportsand20percentofitschemicalsoutput,Gujarat’s
pharmaceuticalindustryhasevolvedintoaninnovation-driven,
knowledge-focusedindustry.
Goingforward,toattainaleadingpositionintheglobalpharmaindustry,Gujarat
wouldhavetodevelopintoanideallocationforglobalclinicalresearch,avid
competitorinCRAMSandcentreofexcellenceforoverallpharmaceutical
development.Further,thestatewillalsohavetocapitaliseonemerging
opportunitiessuchasmedicaltourism,contractresearchandpharmaceutical
machinerymanufacturing.Keytothisprocesswillbe-buildingglobal
competitiveness,developingastrongtalentpoolandadoptingaconduciveglobal
mindset.
Pankaj Patel Pradeep Udhas

Chairman and Managing Director, Head - Markets
Cadila Healthcare Ltd. KPMG in India
Share of Gujarat
42% 22% 52000
India’s Pharma India’s Drug People Employed in

Turnover Exports Gujarat’s Pharma Industry
TableofContents
Global Pharma Industry – An Overview 01
Indian Pharma Industry – An Overview 02
Gujarat State Profile 04
Gujarat Pharma Industry 06
Evolution
Key Statistics and Comparison 07
SWOT Analysis 10
Cluster Analysis 11
Pharma SEZs in Gujarat 14
Building Blocks and Key Imperatives 15
Creation of a Global Pharmaceutical Hub 18

Conclusion 21
GujaratPharmaIndustry01
GlobalPharmaIndustry-An
Overview
Theglobalpharmaindustryiscurrentlyundergoingsignificanttransformation.
EstimatedataroundUSD607.9billionin2006,theglobalpharmaindustryhas
grownataCompoundedAnnualGrowthRate(CAGR)of6-7percentoverthelast
threetofouryears.TheNorthAmericanregionandinparticular,theU.S.market
dominatestheindustry,followedbyEuropeandJapan.In2006,thesethree
marketstogetherconstitutedabout87percentoftheglobalpharmamarket.
Significant Trends
Asia-Pacific and Latin America- emerging as the most promising

markets for growth
TheAsia-PacificregionandLatinAmericacurrentlyconstituteasmallershareof
theentireglobalindustry.However,theseareemergingmarketsandaregrowing
ataremarkablerateascomparedtothedevelopedmarkets.Thisismainlyon
accountoffavorableeconomicanddemographicshiftsinthesemarketswhich
aresupportedbysignificantregulatoryreforms.
Market share of generics growing consistently

Governmentsworldwideareencouragingtheuseofgenericproductsinorderto
controlsteeplyrisinghealthcarebudgets.Currently,emergingmarketscontribute
60percentwhiletheregulatedonesaccountfortheremaining40percentofthe
worldgenericspie.Globally,thegenericspenetrationisexpectedtoincrease
significantlyinthecomingyears.
Reducing R&D productivity

AseriousconcernforpharmacompaniesworldwideisthedecliningResearch
andDevelopment(R&D)productivitywithareducednumberofblockbusterdrugs
enteringthemarketannually.Thisisfurtheraggravatedbysteadilyrisingdrug
discoveryanddevelopmentcosts.
Off-shoring/Outsourcing non-core activities to low cost destinations

Theglobalpharmaindustryisundertremendouspressureonaccountof
intensifyingcompetition,weakR&Dpipelines,increasingtime-to-marketofnovel
productsandfewerapprovalsforthcomingfromregulatorstheworldover.Asa
result,thelastfewyearshavewitnessedarapidlygrowingtrendofoutsourcing
andoff-shoringactivities.Multinationalsareincreasingtheircostefficienciesby
outsourcingnon-corefunctions-suchasdrugdevelopmentandmanufacturingto
lowcostdestinations,inordertofocusoncoreoperationslikedrugdiscovery,
sales&marketingandbrandmanagement.
02GujaratPharmaIndustry
IndianPharmaIndustry-An
Overview
TheIndianpharmaindustryhasgainedsignificanttractioninthelastfewyears.It
iscurrentlyonahighgrowthtrajectoryandrapidlyintegratingwiththeglobal
industry.ThisintegrationisopeninguptremendousnewopportunitiesforIndian
Pharmaacrossallsegmentsincludinggenerics,researchanddevelopmentof
NewChemicalEntities(NCE)andContractResearchandManufacturingServices
(CRAMS).Indiancompaniesarenowwellpositionedtoexplorethese
opportunitiesastheyadopteffectiveandefficientbusinessmodelsthatare
spreadacrossoneormoreofeachofthesesegments.
Key Segment and Trends for Indian Pharma
Domestic Market Attractiveness

ThedomesticformulationsindustryhasgrownataCAGRofnearly13percent
from2002-07.ThismarketisexpectedtofurthergrowataCAGRof16percent
overthenextfiveyears.ThisgrowthwillbespurredprimarilybyIndia’sexpected
economicprosperity.Theindustryisalsowitnessingagradualshiftinthedisease
patterntowardschronicailmentssuchascardiovasculardiseases,diabetes,
obesity,etc.,reflectingthechanginglifestyleofIndia’surbanpopulation.
Inthemediumtolong-term,aconsiderableshareofthegrowthisexpectedto
comefromtheTierIIandIIIcitiesandruralmarkets,inadditiontoTierIcities.
Global Generics Opportunity

ForIndianPharma,genericshasalwaysbeenthemainstayoftheindustry.Indian
companieshavetranscendeddomesticboundariesandexploredinternational
marketsandinparticulartheU.S.andEuropeancountries.However,Indian
companiesarenowshiftingfocusandforayingintonewunder-servedand
emergingmarketsinLatinAmerica,SouthAfrica,RussiaandotherCISnations
andJapan.Semi-regulatedmarketsoffertremendouspotentialduetothe
continuouslyimprovingeconomic,demographicandregulatoryfactors.
Almostallthesegenericsmarketsarenowsettoreportdouble-digitgrowth.
Currently,Indiahascapturedonly10percentoftheglobalgenericsindustry.
However,itholdsadominantpositionintermsofthetotalAbbreviatedNewDrug
Application(ANDA)andDrugMasterFile(DMF)filings.Hence,IndianPharmais
aggressivelypursuingitsgrowthstrategythroughacquisitions,marketingand
distributionalliances,increasedfocusonbuildingnichetherapeuticportfoliosand
ParaIVfilings.
Research and Development

WiththeintroductionofproductpatentsinIndia,pharmacompanieshave
recognisedNCEresearchasoneofthekeystrategiesforlongtermsurvivaland
growth.Mostleadingcompanieshaveventuredintothissegment.Thetop
pharmacompaniesarenowshellingoutasmuchas7-9percentoftheirsales
revenuestowardsconductingNCEandNDDSresearch.Theimpressivegrowth
andspecialisationachievedbyIndiainthissegmenthasalsoattractedthe
attentionofmultinationalinnovatorcompanies,whichareincreasinglypartnering
withdomesticcompaniesthroughin-licensingandout-licensingdeals.
Anothertrendobservedisthatseveralplayersarehiving-offtheirR&Dunitsinto
separateentitiesinordertoincreasethefocusontheirresearchoperations,scale
upoperations,improvethescopeofcollaboration,adopteffectivefundingmodels
andoptimiseresourcemobilisationandutilisation.
Contract Research and Manufacturing Services (CRAMS)

Indiaisalsoincreasinglyemergingasoneofthemostgloballypreferred
outsourcing/offshoringdestinationsforpharma.Thistrendcanbelargely
attributedtoIndia’sinherentcompetenciesintermsoflowmanufacturingcost,
highestnumberofU.S.FDAapprovedplantsoutsidetheU.S.,vasttalentpool
havingexcellentchemistryskills;diversepatientpool,strongsupportfrom
ancillaryindustriessuchasbio-informatics,clinicaldatamanagement,etc.;and
favourableregulatoryenvironment.IndianPharmaisnowbroadeningthescope
ofitsserviceofferingsbyprovidingawiderangeofservicesspanningtheentire
pharmavaluechain.
GujaratStateProfile
Locatedonthewesterncoast,GujaratisIndia’sseventhlargeststateintermsof
areaandninthlargestintermsofpopulation.Thestate’scapital,Gandhinagar,is
Fact-file thesecondplannedcityinthecountry(afterChandigarh)andislocatedjust32
StateCapital Gandhinagar kilometres(km)fromAhmedabad,thecommercialcapitalofGujarat.TheStateof
Gujarathassomeofthecountry'smostdynamicentrepreneurswhoareoriginal
Area(sq.km.) 1,96,000
andfast-pacedintheirthinkingandfocusedintheirdriveforgrowthand
Population profitability.
(Census2001, 50.6
Million)
Accountingfor16percentofthecountry'stotalindustrialoutputand18percent
LiteracyRate
69 ofthecountry'stotalinvestment,Gujaratisoneofthemostindustrialisedstates
(percent)
inthecountry.
SexRatio(per
921
1000males)
Lengthof 1,600(thelongest Roads
coastline(km) inIndia)
•Totalroadlength:73,600km
GSDPatfactor
cost(current 54 •Roadlengthper1000km:628.8
price)(USDbillion) •Over95percentofroadlengthissurfaced.
GSDPover10
12.4
years(%)
NationalHighway
1,572 Airports
Length(km)
Ahmedabad,
•HighestnumberofairportsascomparedtoanyotherstateinIndia
Bhavnagar,Surat, •InternationalairportatAhmedabad
Bhuj,Rajkot,
DomesticAirports •Domesticairports:Ahmedabad,Bhavnagar,Bhuj,Jamnagar,Kandla,
Porbandar,Kandla,
Keshod,Vadodara,
Jamnagar Keshod,Porbandar,Rajkot,Surat,Vadodra.
International
Ahmedabad
Airport
Power
Kandla,Dahej,
MajorPorts •Installedgenerationcapacity:9,561MW(ason31-03-2007)
HaziraandMundra
•Adequateinter-regionaltransmissionanddistributioncapacity
Chemicals,Drugs
•Estimatedpeakdemandforpowerin2011-12:14,031MW.
and
Pharmaceuticals,
Gemsand
KeyIndustries
Jewellery,Mines
andMinerals,
Textiles,
Agro-based
Monthlyper
capitaexpenditure 15.3
(USD)
Source: Gujarat Socio Economic Review 2006-07
Ports
•Totallengthofcoastline:1,600km-representingone-fourthof
India’swaterfront
•Fortyminorandintermediateports
•Tennewgreenfieldsitesidentifiedtobedevelopedasdeep-water
ports.
Railways
•Lengthofrailwayline:5,188routekms(ason31-03-2007)
•BroadGauge:2,736kms
MetreGauge:1,665kms
NarrowGauge:787kms.
Gas Grid
•Statewidegasgridof2,200km,ofwhich1,134kmisoperational
•Onlystatehavingmorethanonegasproducer
•Ambitiousprojectunderwaytocoverentirestatewithnetworkof
gaspipelines.
Gujarat has emerged as the SEZ capital of India based

on land area, with 51 sanctions, encompassing
16,500 hectares of land
GujaratPharmaIndustry
Brief overview of the evolution of Gujarat’s Pharma

Industry
AlembicChemicalWorksCo.Ltd.,oneoftheoldestpharmacompaniesinIndia,
wassetupinVadodarain1907,justsixyearsafterIndia’sfirstdomestic
pharmaceuticalunit-BengalChemicalandPharmaceuticalWorkswassetupin
Calcutta.SarabhaiChemicalswasstartedsoonthereafter.
Theindustryhadreceivedstrongsupportfromtheacademicfield.In1940,the
DrugsLaboratoryinVadodarawasestablished,followedbyLMCollegeof
Pharmacy.Furtherin1989,theB.V.PatelEducationTrust,Ahmedabadand
GujaratBranchofIndianPharmaceuticalAssociation(IPA)-establishedtheB.V.
PatelPharmaceuticalEducationandResearchDevelopment(PERD)Centrein
Ahmedabad.
Inthelastfewdecades,theinvestedcapitaltolabourratiohasrisensignificantly.
Theemploymentalmostdoubledbetween1979-80and1997-98.Overtheyears,
theindustryhasdevelopedstronglinkageswithrelatedsectorsandindustries
suchaschemicals,pharmamachinery,informationtechnology,etc.
Therearecurrentlyapproximately3,500drugmanufacturingunitsinGujarat.The
statehousesseveralestablishedcompaniessuchasTorrentPharma,Zydus
Cadila,Alembic,SunPharma,Claris,IntasPharmaceuticalsandDishman
Pharmaceuticals,whichhaveoperationsintheworld’smajorpharmamarkets.
Overthelastfewyears,Gujarat’scontributioninthegrowthofIndia’s
pharmaceuticalindustryhasbeensignificant.Thestatecommands42percent
shareofIndia’spharmaceuticalturnoverand22percentshareofexports.
Approximately52,000peopleareemployedinGujarat’spharmaceuticalsector,
whichhaswitnessed54percentCAGRincapitalinvestmentsoverthelastthree
years.1
1FoodandDrugControlAdministration(FDCA)
Gujarat’s pharma industry: Some key statistics and

comparison with the Indian Pharma industry
Source: FDCA, CRISIL Report
ValuedatUSD4.4billionin2005-06,Gujarat’spharmaindustryhasgrownata
stupendousCAGRofalmost88percentbetween2002-03and2005-06,as
againstthe18percentgrowthregisteredbythepharmaindustryofIndiaasa
whole,inthecorrespondingperiod.
Intheexportssegmenttoo,Gujarat’spharmaceuticalindustries’performancehas
beenexemplary.Exports,valuedatUSD1.1billionin2005-06,havegrownatan
impressiveCAGRofnearly78percentbetween2002-03and2005-06asagainst
the28percentgrowthinIndia’stotalpharmaexportsduringthesameperiod.
Source: FDCA,
Ofthestate’stotalexports,bulkdrugsconstitutedfor40percent,while
formulationsaccountedfortheremaining60percent.
GujaratholdsadominantpositioninIndia’spharmaindustry.Thestatehas
successfullycapturedashareofover42percentofIndia’stotalturnoverin
2005-06.Thisisasteepincreasefromthemere10percentmarketsharein
2002-03.
Intermsofexportsalso,Gujarat’sshareinIndia’stotalpharmaexportshas
increasedconsiderably.WhileGujarathadonlyan8percentmarketshareinthe
totalexportsin2002-03,by2005-06itaccountedforasmuchas22percent.
Source: FDCA,
Asaprecursortogrowth,CapitalinvestmentinthepharmaindustryinGujarat
hasalsoincreasedatanastoundingCAGRofabout54percentbetweenFY’03
andFY’06–reflectedintheincreaseofnumberofunits(bothownaswellas
loan)from1,964in2003to3,462in2007.
Gujarat Pharma – a SWOT analysis
Strengths Weaknesses
• Moderninfrastructurefacilities • LowlevelofR&Dspend
• Backwardlinkageswithrawmaterialsuppliers • Relativelyinadequatetechnicalmanpowerand
• Establishedpharmaindustry skilledworkforce
• Entrepreneurialmindset • Limitedinternationalexposureformostsmall
• Well-developedalliedindustries tomediumscalecompanies.
• Benignregulatoryenvironment.
Gujarat
Pharma
Opportunities Threats
• SEZ-ledsignificantexportopportunities • Announcementoftaxholidaysfrom
• HighgrowthsegmentssuchasCRAMS,R&D governmentsofotherIndianstates
andgenerics. • Emergenceofotheralternativepharma
destinationsabroad
• Inadequateemissionnormsandwaste
disposalfacilitiesmayhindergrowth.
Source: KPMG Analysis

Clusters
A cluster is defined as a geographically proximate group of companies and
associated institutions in a particular field, linked by commonalities and
complementarities.
Foranysuccessfulindustry,oneofthedrivingforcesisthepresenceofSmall
andMediumscaleEnterprises(SMEs).ApeculiarcharacteristicofSMEsisthat,
generallytheyexistandthriveinclusters.
Types of Clusters Examples
Marblecuttingandpolishingindustries
Resource-basedcluster
aroundMakranainRajasthan
Auto-componentindustryinGurgaon
Inducedcluster
triggeredbyMarutiSuzuki
‘Me-too’ CottonknitwearunitsinTirupur
Advantage derived from clusters
Availabilityof Common
Proximityto Common mindsetand
business Abundanceof Availabilityof
sourcesofraw infrastructural healthy
development customers skilledlabour
material facilities competitive
services culture
Ahmedabad Cluster – A case study
AlargenumberofsmallfirmsweresetupinAhmedabadduringthe1970sand
1980s.Thisphasewasfurtherstrengthenedasaresultofgrowingexportsto
RussianandAfricancountries.Duringthisgrowthprocess,afewfirst
generationentrepreneursgraduatedfromsmalltomedium/largefirmsand
somelaterentrantsbecamesizeableenterprises.Inturn,thisgrowthphase
witnessedtheentryofnewentrepreneursinthesmallscalesector.
Atpresent,itisestimatedthattherearearound75-100bulkdrugproducersand
1000manufacturingunitsmostlyinformulationsandotherareasincluding
excipients,disposables,homeopathic,ISMandmiscellaneousproductsunder
thepurviewofFDCA.Ofthese10arelarge,100aremediumandtherestare
smallunits.ThemajorplayersinandaroundAhmedabadincludeZydusCadila,
SunPharma,Torrent,Core,Alembic,Dishman,IntasandSarabhai.Themajor
productsmanufacturedinthisclusterinclude:
(a)Pharmaceuticals—bothallopathicandayurvedicformulations,indifferent
dosageforms(includingtablets,liquid,capsules,externalsandinjectables),and
(b)MedicaldisposableproductslikeIVsets
Around50manufacturingunitsproducemedicaldisposables.Therestarein
formulationsincludingayurvedicproducts.
Why Ahmedabad?
Availabilityofraw
SupportInstitutions FinancialInstitutions Industrialassociations
material
•Bulkdrugs •B.V.PatelPERD •SIDBI •IDMA-GSB

•Excipients Center •ICICI •MDMA
•Coatingmaterial •TheFoodand •GSFC •ADMA
•Emptycapsules DrugControl
•Preservatives Laboratory
•Ampules •LMCollegeof
•Glassvials Pharmacy,
Vadodara
Stronglinkagesbetweensmallandmediumsizeplayers,industrialbodies,andmedicalandfinancial
institutionshascreatedaproperecosystemforthegrowthofthepharmaceuticalindustryin
Ahmedabad.Thisinturn,hasmadeAhmedabadoneofthehighlydevelopedpharmaclustersin
Gujarat.
Characteristic of pharma clusters in Gujarat

Market- based /
Degree of
Export Resource-based / Potential Future
Location Existing products Competition with
Potential Infrastructure- Products
large units
based
API,FinishedDosages, Biological
Marketand
Ahmedabad ContractManufacturing High High manufacturing,
Infrastructure
BiologicalManufacturing MedicalDevices
API,CRAMS,
FinishedDosages, Marketand
Vadodara High High Biological
Biogenerics Infrastructure
Manufacturing
APIs,Formulations, APIsforglobal
Ankleshwar Medium Resource Medium
Vaccines companies
Bharuchand Intermediateand
APIs,FinishedDosages Medium Resource Medium
Vapi/Valsad FinishedDosages
Source: www.clusterpulse.org, KPMG Analysis

Pharma SEZs
TheproposedPharmaSEZsareexpectedtofurtherboostIndia’spharmaceutical
exportssegment.AndGujarat,whichiswitnessingavibrantgrowthinthis
segment,willbeoneofthemajorbeneficiariesofthisdevelopment.SEZsare
instrumentalinbringinginglobalizationatafasterpace,duetotheirinherent
outwardlookingforeigntradefocusbyestablishingcloseglobalcontacts.SEZs,
therefore,offerdistinctadvantagestoexportorientedpharmacompanieswho
arepresentinthesezones.
Currently,Indiarepresentsaverysmallportionoftheoutsourcingmarketas
comparedtoglobalpeerslikeChina,Singaporeetc.Additionally,thesizeof
projectshandledbyIndiaarealsosmall.SEZs—whichhavegoodinfrastructure
facilitiesandtechnology—canhelpthesepharmacompaniesdevelopaglobal
mindset.
GujaratissettowitnesstremendousbenefitsfromthedevelopmentofSEZs,as
italreadyhasanestablishedpharmaecosystemwithexcellentinfrastructure
facilities.ThroughtheseSEZs,pharmacompaniesinGujaratwillfurtherfacilitate
India'sintegrationintheglobalpharmaindustry.
Prominent Pharma SEZs in Gujarat
Area
Company Location Likely Activities Investment
(Hectares)
ZydusCadila Ahmedabad NA NA 48
Pharmaceuticals,APIsand
CadilaPharma Haripura 500 100
Biologicals
Manufacturinghubfor
outsourcingofpharmaceuticals,
Jubilant Vilayat NA 100
finechemicalsandspecialty
chemicals
DishmanPharma Ahmedabad BulkDrugs 396 138
BulkDrugs,Intermediaries,
JBChemicals Panoli(Bharuch) R&Dandcontract 113 130
manufacturing
Source: Press Articles
BuildingBlocksandKey
Imperatives
Therearecertainbuildingblocksthathelpindustriesflourish.Gujarat’spharma
industryisagoodexampleofawell-developedecosystemwithstrongbuilding
blocksthathavehelpedtheindustrygrowatsuchaphenomenalpace.
BelowisasummaryofhowsomethesebuildingblockshavehelpedGujarat
becomeoneoftheleadingstatesforthepharmaindustryinIndia.Further,the
keyimperativesforGujarattoretainitsexistingpositionandwhatwillittakeforit
tobecomeaglobalpharmaceuticalshub,havealsobeenhighlighted.
Thekeyimperativesforsomeofthesebuildingblocksare:
Modern and well-developed infrastructure: Gujaratboastsoneofthebest

infrastructurefacilitiesinthecountry.Beitroads,ports,powerorotherlogistical
facilities,Gujaratranksmuchhigherthanothercompetingstates.Ourmeetings
withvariousindustryleadersrevealedthatinfrastructurefacilitiesand
developmenthelpsthemimmenselyintheirbusinessoperations.Goingforward,
ifthisstrongimpetusoninfrastructuredevelopmentismaintained,theindustry
wouldgrowatasustainablerateinthefuture.
Conducive Business Environment: TheRajivGandhiInstituteforContemporary

StudieshasadjudgedGujaratasthebeststateinIndiafor’EconomicFreedom’.
Proactivegovernmentpoliciesandaninvestorfriendlyregimeisoneofthemain
buildingblocksforthegrowthofthepharmaceuticalaswellasanyotherindustry.
Adequate Talent Pool: Theimportanceofaskilledworkforcefora

knowledge-basedindustrysuchaspharmaceuticalsshouldn’tbeunder-
emphasised.Theindustryneedsanadequatesupplyoflocallyavailableskilled
labourinordertomeettherequirementsofthisrapidlygrowingindustry.Asfar
asavailabilityandemployabilityoftheskilledlabourrequiredforthe
pharmaceuticalindustryisconcerned,GujaratlagsbehindotherprominentIndian
pharmahubs,particularlyMaharashtraandAndhraPradesh.
FromthetablebelowitisevidentthatGujarathasrelativelyfewerstudent
intakesandinstitutionsofferingPharmarelatedcourses.Therefore,todevelop
intoaworldclasspharmaindustryandmeetthedemandforskilledlabour,
Gujaratwillhavetosignificantlyincreaseboththenumberofinstitutionsoffering
Pharmarelatedcoursesandstudentintakes.
No. of Institutes offering

State Student intake
Pharma courses
Gujarat 37 2,345
Maharashtra 83 4,482
AndhraPradesh 82 4,955
Source: Gujarat Socio Economic Review 2006-07
TheseareseveralinstitutionsinGujaratthatoffercoursesinpharmacyand
medicine.Theseinstitutionswillplayanimportantroleindeterminingthe
successofGujarat’spharmaceuticalindustryintheworldmarket.Thereisaneed
toexpeditetheprocessbyinvolvingtie-upswithinternationalresearchand
academicorganisationsandaugmentingthelocalcapacitytomeettheindustry’s
demand.
Cluster-driven Business Growth: ThegrowthofGujarat’spharmaceuticals

industrysofar,hasbeencluster-driven.Theseclustershavenotonlyfostered
competitivenessandcomplementaritiesacrosstheseregionsbuthavealso
createdadiversifiedmanufacturingbaseforvariousproductsacrossthe
pharmaceuticalvaluechain.Governmentalactionscansupportthecreationof
conditionsthatencouragetheformationandgrowthofclusters.Theseclusters
canalsohelpintermsofresourcesharingintheareasoftrainingandR&D
facilitiesaswellasotherfacilitiessuchaswastemanagementandwater
treatmentplants.Theregulatoryandfiscalframeworkshouldprovideincentives
thatfacilitatecompanyformationandgrowthwithinthepharmaceuticalclusters.
Global Competitiveness: Globalisationpermitsmuchgreaterfreedomfor

reapingcompetitiveadvantagesbasedonregionalresourceendowmentsand
opportunitiesforglobalintegration.GlobalisationofGujarat’spharmaceutical
industryandtheenhancedroleofmarketscouldoffergreateropportunities.
Gujarathasatraditionofregionalspecialisationinindustry(textiles,chemical,
petrochemicals,pharmawithinthelargescalesector;specificclustersofmedium
andsmallunitstooabound).Thelongtermdevelopmentperspectivewillhaveto
takeadvantageoftheregion’sexistingpotential.
Well-established Allied Industries: Stronglinkageswiththechemicalssector,a

wellestablishedmachineryandengineeringsector,largenumberofContract
ResearchOrganisations(CROs)andaboominghealthcaresectorhasplayedan
importantroleinthegrowthofGujarat’spharmaceuticalindustry.Partnerships
betweenhospitals,academicandresearchinstitutions,alliedindustriesand
pharmacompaniescancreateanefficientnetworkedmodelthatwillhelpthe
industrygrowatasustainablerate.
CreationofaGlobal
PharmaceuticalsHub
Gujarat,anestablishedmanufacturingbaseforbulkdrugsandformulations—
Emerging Opportunities withitsinherentcompetitiveadvantages—ispoisedtocaptureemergingglobal
opportunitiestobecomeaglobalpharmaceuticalshub.EmergenceofSEZsis
likelytocreateapharmabehemoth-withscaleandinfrastructureonparwith
• Medical Tourism
internationalstandards,thatwillenableittocompeteintheglobalmarketplace.
Theavailabilityofawell-developedchemicalsindustry,whichhasstronglinkages
• Contract Research
withpharmaAPI/intermediates,canbeutilisedtoboostthehighgrowthof
Organisations CRAMSsector.ThiscouldmakeGujaratastrongsourcingbaseforglobalpharma
companies.
• Pharmaceutical Emerging Opportunities:

Machinery
Medical Tourism: WithIndiarapidlyemergingasanattractivemedicaltourism
hub,Gujaratisalsomakingbigstridesinthissegment.Itisfastcompetingwith
otherplacessuchasDelhi,MaharashtraandAndhraPradeshinthissegment.The
stateoffershighqualityandspecialisedhealthcareservicesandinfrastructureat
verylowcosts,thusmakingitapreferreddestinationformedicaltourism.
Gujarathashighlyqualifiedspecialistsparticularlyintheophthalmology,urology,
embryology,orthodontics,oncologyandorthopedicstherapeuticareas.Italso
offersotheradvantagessuchasEnglish-speakinghealthcarepersonnel,no
waitingperiodsfortreatment,andhighstandardsofinternationaltransport.
GiventhegrowingattractivenessofIndiaasaglobaldestinationformedical
tourism,thegovernmentofGujaratlaiddownthe2006MedicalTourismpolicy.
Thiswillfurtherimprovethehealthcareinfrastructureofthestateandattracta
highernumberofpatients.
Thefollowingfactorscanfurtherboostmedicaltourism:
• Assistedhealthcareinstitutionssuchasdaycarecentres
• Supportservicessuchasnursingassociations
• Linkageswithinfrastructurefacilitiesfortransportationofpatientsfrom
airportsandrailwaystations
• Linkageswithorganisations/NGOs,etc.,inoverseascountriestoacquire
knowledgeandleverageopportunities.
Contract Research Organisations: Gujaratishometoapproximately40

percentofCROsinthecountry.Itswellestablishedhealthcaresector,strong
infrastructurefacilitiesandrelativelylowrealestatecostshasluredmanyglobal
andlocalCROstosetupshopinthestate.Globally,contractresearchisahigh
growthsegmentledbyincreasingoutsourcingactivitiesofpharmaMNCs.Given
allthesegrowthenablers,Gujaratcancapturealargerpieofthisglobal
opportunitybyestablishingastrongancillaryservicesindustrybase–suchas
bio-informaticsandclinicaldatamanagementcentres–whichcanfacilitateand
boostR&Dandotherhigh-endactivities.
Pharmaceutical Machinery: Thereisastronglocalandglobalopportunityfor

Gujaratinthemanufacturingofpharmaceuticalmachinery,givenitsstrongand
wellestablishedengineeringsector.Accordingtoindustryestimates,
approximately35-40percentofIndia’spharmaceuticalmachineryisproducedin
Gujarat.Thestronggrowthprospectsofthepharmaceuticalexportssegmentand
growingdemandfromthedomesticmarket,willfurtherfuelgrowthinthe
pharmaceuticalmachinerysector.However,Gujarat’sengineeringsectorishighly
fragmented,especiallythepharmamachinerymanufacturingsegment.Dueto
thehighlyfragmentednature,thereisadearthofpricingpowerandcriticalscale.
Thisinturnrestrictstheabilitytoproducethetechnology-drivenproducts
requiredforoperatinginglobalmarkets.Thepharmamachinerymanufacturing
industryinGujaratneedstoconsolidateandsynergisetheskillsand
complementaritiesavailableinthebroaderengineeringsector(liketheCNC
machinetoolsindustry)tobeabletocreateworld-classplayerswiththescale
andresourcesrequired,totaptheglobalaswellaslocaldemand.
Gujarat’sdominantpositioninIndia’spharmaceuticalsectoriswellknown.The
nextlogicalstepistoaspireforgloballeadershipinthepharmaceuticalindustry.
However,globaldominancewouldrequire:
–Continuanceofcurrentgrowth-orientedpoliciesthathavehelpedGujarat
achievethismark,and
–Acquisitionordevelopmentofcapabilitiesrequiredforoperatingintheglobal
marketplace.
ManypharmacompaniesinGujarathaveadoptedtheinorganicrouteto
participateintheglobalmarkets.However,operatingintheworldmarketsisnot
justaboutacquiringglobalassetsbutalsoabouthavingaglobalmindset.Inorder
tobenefitfromtheon-goingintegrationoftheworldpharmamarkets,the
pharmaindustryandcompanieshavetochangeinternalmindsetstothinkand
competeglobally,andcreateanenvironmentofinnovation.Companieswould
havetoimbibeaculturethatenhancesitsefficiencywhilerespondingtothe
globalchallengesindifferentgeographies.Havingaworld-classmanagement
team,reflectiveofthediverseglobalmarketsinwhichtheyoperate,wouldbea
startinthisdirection.Theenterprise-wideuseofglobalITsolutionsisanother
areathatneedstobeaddressed.
Globalisation model for Gujarat’s Pharmaceuticals Industry

Conclusion
Indiaisbecominganintegralpartoftheglobalpharmaceuticalvaluechainand
manyIndiancompaniesareparticipatinginthisglobalgrowthpotentialthrough
theirorganicaswellasinorganicinitiatives.PharmacompaniesfromGujarathave
alsocontributedsignificantlytothisprocessthroughacquisitionsofforeign
assetsorbyhavingexport-ledbusinessmodels–reflectedinGujarat’sincreasing
shareinIndia’spharmaexportsaswellasindustryturnover.Goingforward,as
Indiafurtherincreasesitsdominanceintheworldpharmamarket,Gujaratwithits
growthenablersandstrongbuildingblockscanbecomeaglobalpharmaceutical
hub.However,thiswouldcallforanenormouschangeinmindsetand
transformationtoattractglobalcapitalandtalent.Thepathtoglobalisationisfull
ofopportunitiesbutalsofraughtwithrisks.Companieswhichwoulddevelopthe
rightframeworkthatwouldhelpthemcapitaliseonthisopportunityandmitigate
riskswillbenefitthemost.
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Acknowledgements
ThisreporthasbeenpreparedbyKPMG,andisbeingreleasedduringtheCentenaryCelebrationofGujarat’sPharmaIndustry,
inAhmedabad, on 5 January, 2008.This report is to be released by Shri Narendrabhai D. Modi, Honb'le Chief Minister of
Gujarat.
The people integrally involved in preparing this report includeAnishTripathi,Amit Shah, Nandita Kudchadkar, Rajiv Parekh,
Jiten Ganatra and Nisha Fernandes fromKPMG.We gratefully acknowledge the support and assistance received from the
PharmaCentenaryCelebrationCommittee.
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in.kpmg.

KPMG in India KPMG Contacts Pharma Centenary

Pankaj Patel Pradeep Udhas

42% 22% 52000

India’s Pharma India’s Drug People Employed in

Global Pharma Industry – An Overview 01

Indian Pharma Industry – An Overview 02

Gujarat State Profile 04

Gujarat Pharma Industry 06

Building Blocks and Key Imperatives 15

Creation of a Global Pharmaceutical Hub 18

Asia-Pacific and Latin America- emerging as the most promising

Market share of generics growing consistently

Reducing R&D productivity

Off-shoring/Outsourcing non-core activities to low cost destinations

Key Segment and Trends for Indian Pharma

Domestic Market Attractiveness

Global Generics Opportunity

Research and Development

Contract Research and Manufacturing Services (CRAMS)

Gujarat has emerged as the SEZ capital of India based

Brief overview of the evolution of Gujarat’s Pharma

Gujarat’s pharma industry: Some key statistics and

Source: FDCA, CRISIL Report

Source: FDCA, CRISIL Report

Source: FDCA, CRISIL Report

Source: FDCA, CRISIL Report

Gujarat Pharma – a SWOT analysis

Source: KPMG Analysis

Types of Clusters Examples

Advantage derived from clusters

Ahmedabad Cluster – A case study

•Bulkdrugs •B.V.PatelPERD •SIDBI •IDMA-GSB

Characteristic of pharma clusters in Gujarat

Source: www.clusterpulse.org, KPMG Analysis

Prominent Pharma SEZs in Gujarat

DishmanPharma Ahmedabad BulkDrugs 396 138

Modern and well-developed infrastructure: Gujaratboastsoneofthebest

Conducive Business Environment: TheRajivGandhiInstituteforContemporary

Adequate Talent Pool: Theimportanceofaskilledworkforcefora

No. of Institutes offering

Source: Gujarat Socio Economic Review 2006-07

Cluster-driven Business Growth: ThegrowthofGujarat’spharmaceuticals

Global Competitiveness: Globalisationpermitsmuchgreaterfreedomfor

Well-established Allied Industries: Stronglinkageswiththechemicalssector,a

• Pharmaceutical Emerging Opportunities:

Contract Research Organisations: Gujaratishometoapproximately40

Pharmaceutical Machinery: Thereisastronglocalandglobalopportunityfor

Globalisation model for Gujarat’s Pharmaceuticals Industry

KPMG in India KPMG Contacts Pharma Centenary

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